Less comeback for non-adviser Ross referrals
Ross Asset Management investors who were recommended to the firm by professionals who weren’t financial advisers will have a much harder time taking legal action against them.
Monday, December 10th 2012, 6:59AM 
6 Comments
by Niko Kloeten
The Financial Markets Authority has revealed it is investigating an undisclosed number of financial advisers who recommended Ross Asset Management to their clients; however, it is understood most of the recommendations for Ross came from accountants and lawyers.
A corporate lawyer, who did not want to be named, said that aggrieved investors could possibly claim negligence on the part of these other professionals but they would have some hurdles to overcome to prove it.
“First you have to have a duty of care or some relationship. Then you have to show that whoever it was - accountant or lawyer - that they did not take the care in providing that advice that a reasonable person in their position would.”
The lawyer said a lot would depend on how the lawyer or accountant framed their recommendation: “most would be very careful in the way they said it”.
Institute of Financial Advisers president Nigel Tate said despite these professions not being covered by the Financial Advisers Act, they still had a professional obligation to assess the credentials of those they were referring their clients to.
“You can’t say ‘all I did was refer you to them, it’s nothing to do with me’,” he said.
He said the issue brought up a bugbear of financial advisers: other professionals offering opinions on their advice to clients.
“I was speaking yesterday to a couple of individuals about the number of times as a financial adviser will make recommendations and the client will go to a lawyer or accountant and they say ‘I wouldn’t do that’.
“It’s very frustrating from a practitioner’s perspective when someone not qualified or competent turns around and provides an opinion on your advice. You don’t have cardiologists making recommendations on orthopaedic surgery.”
Investor group spokesman Bruce Tichbon said Ross was recommended to him by an accountant.
“It seemed to be like great news I’d picked up under the radar… it turned out to be the worst decision of my life.”
Niko Kloeten can be contacted at niko@goodreturns.co.nz
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Comments from our readers
And helpfully, section 10 cites what is NOT financial advice, namely, s10(3)(e) - recommending that a person consult a financial adviser.
Moreover, s33 – Financial adviser must exercise care, diligence, and skill, - applies only when providing a financial adviser service – as defined above. So it again, it is unlikely a breach will be found there.
FMA may ping advisers for ‘recommending’ RAM under other legislation, but if the advisers concerned only recommended RAM (who is / was another financial adviser) the breach is unlikely to be under the Financial Advisers Act 2008.
But how can those accountants and legal advisers prove they carried out that duty diligently?
A failure like Ross Asset Management is virtual proof they did not thus reversing the onus of proof.
'Res Ipsa Loquitur' is the legal principle. It 'speaks for itself' that they failed to check.
Referrers need to have a justifiable basis for a referral. Sticking with the bank, or referral to a Rotary mate may not be enough basis. Only time will tell, and a few court cases. Evolution sometimes marches along rapidly.
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